Republican presidential candidate Herman Cain has a catchy idea for reforming the American tax system. He calls it the 9-9-9 plan. It entails a nationwide 9 percent income tax, a 9 percent corporate tax and a 9 percent sales tax. It’s gotten a lot of attention for being simple, and on the surface seemingly fair. After all, everyone will pay the same tax rates nationwide, right?
Not exactly. Flat taxes and variants thereof have long been popular among American conservatives. To many people, the American tax system makes no sense. A simple solution seems attractive. Why shouldn’t everyone pay the same tax rate? It sounds great, until you adjust the plan for reality.
The problem with a flat tax rate, in a nutshell: The poor pay more. It may seem counterintuitive. After all, if the rich and poor pay the same percentage in taxes, the rich should pay more and they do, in raw numbers. But they can also afford to pay more. Higher taxes are less of a burden when you can survive on a tenth of your income. That 9 percent for the rich is coming out of surplus money. But for the American poor, that 9 percent may not be money they can afford to pay.
Americans on minimum wage or near the poverty line need 100 percent of their income to survive. And for some, even that is not enough. Cain’s plan shifts the tax burden even more heavily onto the poorest Americans. Right now, they pay lower taxes or receive a refund from the government so they can survive. The 9-9-9 plan would result in a tax increase for the poor.
It also means less income tax for the rich, and a much lower corporate tax rate. We shouldn’t be lowering taxes on corporations to improve the economy. We should be closing loopholes so that our government gets the money it is owed. Some major companies pay no taxes at all. Exxon Mobil paid nothing in 2009 and 2010, while actually receiving a subsidy from the government. While the rest of Americans were paying taxes, Exxon Mobile was getting government funds. While the rest of us struggled through the recession, they posted record profits.
A flat sales tax is even worse. Sales taxes hurt the working class: They must pay more for food, medicine and basic consumer goods. And they give up a much higher percentage of their income to these taxes than the rich. Sales taxes favor the rich while punishing those who can least afford to pay them.
America needs progressive taxation. A progressive tax means the poor and working class, who can’t afford to give up their income, pay less. The rich, who have received so much from our society, pay more. This narrows the gap in incomes between the richest and poorest Americans. And that’s good for our society. Less poverty and a lower income gap mean a higher standard of living, a healthier and more educated population, and less crime. The way to measure our society’s health is by the status of our poorest members.
When the American poor are successful, we all are.